- Date : 18/05/2022
- Read: 4 mins
Investing in cryptocurrency is a long-term game; then why compromise your assets when you die? Having firm estate planning for the future can help your loved ones have the crypto assets you earned during your lifetime, after your death.
All that you own in your life stay here when you die; even the crypto coins that you buy or hold get lost forever in a cloud-based system. With the increase in the popularity of investing in cryptocurrencies, people have made this a personal subject because not everyone is comfortable enough to tell their family or friends that they are active crypto investors or traders. As a result, their crypto assets are lost forever when they die. About 20% of the crypto assets of crypto investors are lost till date, and they are unrecoverable. Read this article to know about what happens to your cryptocurrency assets when you die and how to set up digital wallets that will help your family and friends to access them in the future.
What is cryptocurrency?
Cryptocurrency is a kind of digital currency in blockchain and is verified by a network of computers. Bitcoin, Ethereum, and Dogecoin are types of cryptocurrencies that are fungible tokens. You can exchange or trade them, just like you trade physical money, because 1 Bitcoin (BTC) is always equal to 1 Bitcoin (BTC).
Crypto assets are not centralised, and that's why it is necessary to include them in your estate planning or your loved ones will lose their access after your death. The cryptocurrency exchange is an organisation that manages the buying and selling of multiple digital currencies. India's some of the top cryptocurrency exchanges are WazirX, CoinDCX, CoinSwitch Kuber, ZebPay, and Unocoin.
Where is your crypto stored?
The cryptocurrencies that you buy or trade are stored in wallets, either in a digital wallet (application or website) or in a physical wallet (hard drive). When you start buying large amounts of crypto, there will occur the need for more storage space. All you need to do is keep a particular amount in an online crypto exchange for trading, selling, buying, and investing. This way, your loved ones or beneficiary will have access to the exchange by simply signing onto the portal.
Storage options from the least secure to the most secure are:
1. Centralised Crypto Exchange (BitStamp, WazirX, CoinDCX)
2. Hot wallets/ Mobile wallets
- Usually free and convenient to use
- Less secure
- It is like a checking account where the money goes in and out regularly
3. Cold storage/ hardware wallet
- Used for storing crypto for a longer time
- It is like a savings account
You only need a private wallet key to log in and a 12 or 24 words long password to recover account information from the cold wallet and hot wallet. Keep your crypto assets safe but do not be extra creative, like playing treasure hunt, because if one part of your code containing the key, PIN, or recovery phase is lost, your assets are lost. Keep your crypto secure but accessible.
Best ways to do estate planning for your crypto assets – Setting up Crypto Estate Plan
No future plan for your crypto assets means their disappearance forever. Unless you leave evident guidelines about accessing your crypto assets, those will be stuck in a cloud and will be of no use to your heirs. The first step to setting up a crypto estate plan is to secure your crypto assets.
- Explain to your loved ones or beneficiary everything about your crypto assets and how can they access it after your death
- Keep your cold storage hardware wallet safe and secured
- Secure security keys, seed phrases, usernames, and password information with instructions for each
- Do not store or upload any confidential information on the internet
- Add a beneficiary in your will and attach a document to your estate plan